The October Cattle on Feed Report is viewed as bearish for CME cattle futures at next week’s open. September feedlot placements were well above expectations and October 1st cattle on feed supplies were at 105% of a year ago and slightly larger than the average trade estimate. The report confirms cattle on feed supplies at a 5 year high, and marks the 10th consecutive month that on feed supplies have been larger than the previous year.
The big surprise in the report was the September placement rate. The average trade estimate had called for placements at 108% of a year ago, while actual placements were at 113%. It’s worth noting that last year’s September placement total was at a record low, while this year’s figure was the largest since 2011. Compared to a year ago in the major cattle feeding states, placements in KS were 4% larger, feedlots in TX put 14% into yards, while the NE placement rate was 21% or 100,000 head larger.
The marketing rate was inline with expectations and also aligned with the October Livestock Slaughter report data, at 103% of a year ago. Net feedlot flows for the month show that feedlots placed 309,000 head more than were marketed versus 121,000 head last year, and the largest net inflow of cattle since 2
The October Cattle on Feed report was also a quarterly report, which included data for cattle on feed by class. The data again indicated that the cow/calf industry is no longer expanding. NASS reported that there were 3.879 million heifers on feed, which was a 13% increase from last year, the 7th consecutive quarter that heifers on feed were greater than a year ago, and the largest October figure since 2012. Not only were heifers larger than a year ago, but also made up a larger percentage of the total cattle on feed. The turn in the cattle cycle continues to put more inventory into the feedlot.
While late week cash trade improved slightly, the on feed data is likely to weigh on cattle futures trade early next week. Our near term view stays bearish on rallies, while the 1st quarter of 2018 holds the best odds for a cash market rally.